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Changes to funding for schools

John Viner gives a summary of the recent changes to the national funding formula and high needs funding.

Summary points

The government proposes to introduce a system of funding that is ‘redistributive’.

The inclusion of high needs funding is aimed at special needs provision and is likely to replace the pupil premium.

This is situation in which there are winners and losers. Read the Stage 2 consultation document to discover the specific implications for your school.

After much delay, the current Secretary of State has committed the government to implementing the long-promised changes to the way in which schools are funded from April 2018. The second stage of the DfE’s consultation process opened on 14 December 2016, with a three-month response window. The results are not known at the time of writing but, by the time you read this, they should be available on the DfE Consultation Hub. Please note that the information in this article was correct at the time of writing.

What’s the story?

The government proposes to introduce a system of funding that is ‘redistributive’, in other words, one where the funding each school receives is determined by a consistent and fair basis, rather than on historic decisions. According to Justine Greening, the current system ‘is unfair, untransparent and out of date. Similar schools and local areas receive very different levels of funding, with little or no justification’. The inclusion of high needs funding is aimed at special needs provision and is likely to replace the pupil premium.

The initiative has been around for some time, having its origins in the days of the Coalition Government. The then education secretary, Nicky Morgan, kicked off the first stage of consultations in March 2016. There was a general welcome for the principle of moving towards a more equitable and transparent funding formula. Understandably, those who were likely losers expressed severe concerns, while those at the other end of the scale urged the government to get on with it. There was a mixed reception to the decision to defer implementation for a year.

The second phase of consultation explored the detail, rather than the broad principles, and there is likely to be little or no substantial change as a result of the consultation exercise.

Briefly, the DfE proposes that:

The national funding formulae for schools, high needs and local authority services for schools will be introduced in 2018/19.

The dedicated schools grant (DSG) will be split into four blocks: for schools, high needs, early years and central school services.

There will be a school-level (‘hard’) formula for the schools block from 2019/20. In the interim, schools will still be funded according to a local formula. The schools block will be ring-fenced for spending on schools, but there will be some limited scope for movement before 2019/20, and some continuing local flexibility from 2019/20.

For schools, the DfE proposes:

to provide up to 3% per pupil increases in 2018/19 for schools due to gain under the formula, and up to 2.5% increases in 2019/20

to include a floor in the schools formula that will limit the overall reduction to any individual school’s budget as a result of the introduction of this national funding formula to 3% per pupil

the MFG for schools of minus 1.5% per pupil year on year will continue, limiting annual reductions to manageable levels.

For high needs funding the DfE proposes:

to provide up to 3% increases in 2018/19 and 2019/20 respectively for local authorities due to gain under the formula

that there will be no cash losses to local authorities as a result of the high needs formula.

For central school services the proposal is to allow local authorities increases of up to 2.4% in 2018/19, and that no local authority will lose more than 2.5% of its per pupil funding in either 2018/19 or 2019/20.

Implications of the proposals

This is one of those situations where there are ‘winners and losers’. At the moment, the main source of school funding is the DSG, within which the ‘schools block’ covers core provision for all mainstream pupils up to the age of sixteen.

Allocations are largely based on historical funding, subject to some adjustments.

However, these are stringent times. The 2015 autumn spending review promised to protect school funding in real terms, while savings would be made from funds relating to wider aspects of education. The National Audit Office’s report on school finances in December 2016 noted that, while the DfE’s overall schools budget was protected in real terms, it did not provide for funding per pupil to increase in line with inflation. Schools in England would be required to make £3 billion of savings by 2019/20 to counteract financial pressures.

What now?

Most schools will be anxious to discover the specific implications for them by studying the Stage 2 consultation document. Some local authorities have designed an audit tool to assist their schools in finding out the specific impact on them, so do check with your LA to find out if they can help. For a ‘quick and dirty’ idea of the impact on your school, visit the School Cuts website, enter your school details and see the likely reduction in funding for you and your neighbouring schools. Secondly, with this knowledge, they should be responding to the consultation.

Further information

By far the most detailed yet concise outline of the story of the new funding formula can be found in the Parliamentary briefing paper School funding in England. Current system and proposals for ‘fairer school funding’. Written by civil servants to bring MPs up to speed, this is an excellent quick-access resource and can be found at: http://bit.ly/School-Funding-Briefing